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Flashcards in week 7 Deck (32)
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1
Q

what is the total economic cost?

A

sum of opportunity costs of all inputs including implicit costs

2
Q

implicit cost of capital is the

A

opportunity cost of financial capital invested in firm

3
Q

what are the possibilities of financing K investment?

A
4
Q

what is the long run break even point?

A

P= minimum of ATCLR

firms earns zero economic profits or “Normal economic profits” i.e. revenues cover all economic costs and provides “normal” rate of return on financial/physical capital investments

5
Q

what does firm look like in the long run?

A
6
Q

entry and exit of firms

what happens in the long run?

A
  1. at the firm level, firms can alter K input
  2. at the market level, firms may exit or enter the industry
7
Q

when will new firms enter an industry?

A
8
Q

when wil EXISTING firms exist an industry?

A
9
Q

what does a firm making profits in the short run look like?

A
10
Q

what does a firm in the short run making loss look like?

A
11
Q

when is an industry in long run equilibrium?

A

when firms have no incentive to enter or exist i.e. P=min of ATCLR

12
Q

two desirable features of LR equilibrium

A
  1. ATCLR is minimised –> goods are produced at lowest costs which is also the price customers pay
  2. capital is allocated efficiently
13
Q

show how market influences typical firm in the long run

A
14
Q

Short run impact of demand increase

A
15
Q

show short run impact of demand increase

A
16
Q

demand increase in the long run

A
  1. more firms in the industry
  2. LR output > SR output
  3. Price back to min ATCLR and zero economic profits
17
Q

demand increase in the long run SHOW

A
18
Q

what is the short run impact of demand decrease?

A
19
Q

what is the LR impact of demand decrease?

A
20
Q

entry and exit of firms will

A

end until price back to minimum of long run ATC

21
Q

what is a constant-cost industry?

A

LR average costs remain unchanged as industry output rises

22
Q

what is external diseconomies of scale

A

factors outside control of a firm that raises its costs as industry output increases

23
Q

what is external economies of scale?

A
24
Q

showwhat SLR looks like in the long run

A
25
Q

what does SLR look like for diseconomies of scale

A

D increases more than S

as industry Q rises, cost of inputs rise

26
Q

show what SLR looks like for economies of scale

A
27
Q

what is a monopoly

A

a market with a single seller with no close substitutes

high barriers of entry

28
Q

why one seller in certain markets?

A

economies of scale

29
Q

describe relationship between MR and D for monopoly

A

MR is twice as steep as D

MR

AR= P

30
Q

show profits for a monopolist

A
31
Q

show Deadweight loss for a monopolist

A
32
Q

monopolist produces too little. Why?

A